Analyst says estimates about China Mobile-Apple deal are overzealous

The much-anticipated rollout of Apple iPhones on the China Mobile network is expected to happen next week, giving Apple shares a lift on Wall Street.

But Bernstein Research analyst Toni Sacconaghi is counseling caution, arguing that many projections for China Mobile’s impact on Apple may be “overzealous.

“Currently, we see upside to Apple’s December quarter estimates, and believe that an imminent China Mobile announcement is likely to drive increases to consensus earnings per share for next year, pointing to a favorable risk-reward equation for the stock,” he told clients in a Wednesday note.

But he also said “estimates for March and June currently appear high and some estimates for China Mobile’s impact may be overzealous. Accordingly, we encourage investors to carefully monitor numbers post the China Mobile announcement, which if they remain too high, risks creating disappointment for guidance on January’s earnings call.”

China Mobile, the world’s largest carrier with more than 700 million subscribers, has reportedly signed a long-awaited deal with Apple, giving the Cupertino, Calif.-tech giant a broader presence in a major market.

Sacconaghi estimates that the deal would mean Apple could add up to 15 million more phones, arguing that other estimates, including one that sees Apple selling 40 million phones, seem aggressive.

The China Mobile deal appears to have led to some uncertainty on Wall Street about what to expect from Apple’s upcoming quarter reports.

Saconagghi said his estimates for the fourth quarter “do not yet include the impact of China Mobile.”

“But it is unclear if and how much of the consensus has already incorporated China Mobile in its forecasts,” he added. “While the

addition of China Mobile will undoubtedly cause estimate increases, the anticipation of which has been a key driver of the stock over the last month, we worry that revised estimates may ultimately remain too aggressive, creating the potential for disappointment on the January earnings call.”

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